What to do when the market trades near an important level

AUDUSD

Hey traders, hope everything is going well on your end…

Let me ask you one question…

What do you do when the market trades near an important long term level?

The answer to this question will come in handy today, because today, there are plenty of currency pairs that are trading near an important level…

And you need to be prepared… so again… What do you do? Whats the first thing that pops up in your mind?

Think about it and comment below…

Here is what I think…

When ever the market trades near an important long term level, the market can do three things:

  • Get rejected from that level
  • Break through that level
  • Trade in a tight range around that level

Now, there are a lot of traders that try “guess” what is going to happen, sometimes they will nail it down, but most of the times they will fail…

My approach to handle this

Most of the time, when the market trades near an important level, it will range in the short term charts…

So, when ever the market gets near an important level, I patiently wait for that range in the short term charts. Sometimes this range develops in a few hours, but some other in a few weeks… So if you arent a patient trader, learn to be one.

Once you have a clear short term range, you can have a trading plan.

If the market breaks through the upper extreme of the range, you’ll begin to look for long opportunities.

If the market breaks through the lower extreme of the range, you’ll begin to look for short opportunities.

That simple!

Lets take a look at some examples…

AUDUSD Analysis

It is trading near an important long term level around 0.8750

AUDUSD 1D

It looks like it has been already rejected from that level… but that’s not the case, a few days back it did exactly the same thing but it retraced back…

So in order to determine what the market is likely to do we need to look at the short term charts:

AUDUSD 1H

In this chart you can see that the AUDUSD is still trading inside that range, but you can have a complete trading plan now…

If it breaks above the resistance level, you’ll start looking for long opportunities. Or if it breaks through the bottom of the range you’ll start to look for short opportunities.

Makes sense?

If you take a look at other charts you’ll see they are behaving in a similar way… the NZDUSD for instance and others.

Your Turn

What do you do when the market trades near an important level?

Are you currently trading the AUDUSD?

What other pairs are you trading?

How did you do last week with the NFP report?

Share your thoughts!

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Raul Lopez

I’ve been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .


  • Varahala Babu

    hi raul…can we go this trade short…because it has already broken 0.86611 ( short term green line support )

    • Raul Lopez

      Hello Varahala, I woudlnt… the breakout of that level is not my signal!

      On the other hand, if you got your signal, just take it.

  • Varahala Babu

    hi raul….is gbp/jpy is in clear market condition ?…can we go short oppertunities by looking short term charts

    • Raul Lopez

      Hello Varahala, yep, since last week that the GBPJPY is trading in a bearish condition!

      Good luck!

  • pduarte

    Hello Raul,

    NZDJPY and GBPJPY waiting for a retracement to enter short.

    • Raul Lopez

      Yep, play close attention to the 15M chart mate!

      Good luck! And have a great weekend!

  • Varahala Babu

    hi raul…aud/usd and nzd/usd broken short term upper resistance level as mentioned in the above article ..can we go long once it retraced back to the short term resistance level…

    • Raul Lopez

      Hello Varahala,

      It’s not just a retracement Varahala, or maybe if thats your system, then you need to take them… I have more rules than just a retracement to get my signal…

      Taking a trade based on this retracement will get you in the market in false breakout, just like happened to the AUDUSD and NZDUSD…

      How did you handle it?

      Good luck!

  • Chad Hogan

    Hi Raul,

    Ive been waiting for the AUDUSD to make up its mind. I like you are waiting for a break of the range. The only downfall with this approach is that sometimes we dont get a retest of the broken level and are left behind. Still though I dont see a way around that. Ive lost many trades in the past trying to anticipate market direction or have been stopped out placing breakout trades from important levels. Good article, Thanks
    Chad

    • Raul Lopez

      Yep, I agree with you… Or like what happened today, a false breakout…

      So I think the way we handle it its the best possible way!

      Good luck Chad! And have a great weekend!

  • cassyd

    You are right about that. Most of the time the tight ranges can cripple your account if taken as long or short signals. but now we need to also be careful of false breakouts, because they are also common at this sort of charts. The ranges become perfect opportunity for scalpers thou.

    • Raul Lopez

      You are right Cassyd, that’s exactly the reason I dont trade breakouts when the market trades near an important level!

      good luck!

  • Waqas Khan

    very nice. tanks

    • Raul Lopez

      No problem Waqas!

  • Johanna

    AUSUSD is going long on the daily chart. We should then monitor the short term charts to do the same. What do you think Raul?

    • Raul Lopez

      Hello Johanna,

      What makes you think its going long???

      I still think we need to wait for the AUDUSD to break the range… See the above article!

      Cheers,

  • Johanna

    Hi Raul
    You were write about waiting for write moment. I traded USDJPY, AUDUSD, GBPAUD and GBPNZD and they all paid well. I was reading Varahala’s comment about the USDJPY. I maintain its crucial to take advantage of the trend in the long term charts especially the daily one and not trade against it. I waited for the USDJPY to go short and it paid off because I did not trade against the trend. I appreciate your help Raul.

    • Raul Lopez

      What comment about the USDJPY? Sorry I dont see it…

      Right now I think we need to wait a little longer in the USDJPY, its just trading at an important level, its difficult to tell which direction it will head.

      I’m glad your other trades went well! Congrats, at the end you are the one taking those trades!

      Cheers,

  • pduarte

    Hello Raul,

    Once again I agree with you about your analysis. But for now we have to wait to see.

    I am also following these currency pairs:

    NZDJPY
    AUDNZD
    NZDUSD

    Cheers,

    • Raul Lopez

      Hey Paulo, how is everything body?

      I have the NZDUSD also trading at an important level, NZDJPY about to break that range (bearish), and AUDNZD also at an important level…

      That’s what you’ve got?

      Cheers bro!

      • pduarte

        Hi Raul,

        I hope is everything fine with you.

        Sorry to answer only now.

        I think that for now we got to stay out of the market.
        There are times that we can go wild, but now, and i think about after the last weeks that the market have moved strongly, I think that we have to see were the market want’s to go.
        My idea is that the USD is going stronger, the EUR;NZD; AUD are going weaker, but that is only my idea, and as you know in the next two days and weeks, we are going to have plenty of important announcements. so I think, we hare going to have plenty of opportunities.

        What do you think?

        Cheers Bro!

        • pduarte

          Sorry, just one more thing.

          About the NZDUSD and NZDJPY, I think that we are going to have opportunities to trade, but about the AUDNZD I am not so sure.

          What do you think about this?

  • Varahala Babu

    hi raul …i have a pending order in gbp/aud…as it is in article i have placed the order…but the long term resistance has broken twice…can we still hold the order as it is

    • Raul Lopez

      Hello Varahala,

      Nope, that order is no longer valid… In fact, I’m no longer monitoring the GBPAUD… There are other currencies with clearer market conditions this week…

      Good luck!

  • tp

    Raul, same plan as you. I’ll waiting for clear sign before taking a position.

    • Raul Lopez

      Good luck to us then… We’ll see of it breaks the upper resistance level…

      Cheers,

  • Varahala Babu

    hi raul…..thanks for the plan….can we trade inside the range looking for long oppertunities around the bottom of the range and short oppertunities top of the range….right now it was trading around the top of the short term range….if it gets rejected can we go short in the above aud/usd short term range ?

    • Johanna

      Hi Raul
      Thanks for the explanation. I actually traded GBPAUD and went short after it crossed the important level taking advantage of the short opportunity. I managed to collect some pips. I was a bit confused about the range but I was studying different charts.

      • Raul Lopez

        Congrats there Johanna! I’m no longer monitoring the GBPAUD…

    • Raul Lopez

      Not in this case Varahala, It’s not that clear (yet)… I’d rather wait for the AUDUSD to break either extreme of the range and then look for trade opportunities in the direction of the breakout….

      Good luck!